Comment: Australia and government needs Holden to stay

Demise of local car industry will have massive repercussions in Australia.

05 December 2013Andrew MacLean

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Should Holden get more subsidies?Liberal MP Wyatt Roy says Holden already gets enough tax-payer assistance, but Labor's Amanda Rishworth says the government should do more to keep the car maker in Australia.

The impact of Holden potentially closing down its South Australian factory will rupture a vein of our economy and break the backbone of numerous communities.

Sure, the cars we actually build in Australia need a health check to compete against a raft of more affordable, more efficient and better quality vehicles and some - both within the government and the wider public - believe propping it up with tax-sourced funding is way too generous, but the opposite may be even worse.

Loss of the Australian car industry would have far reaching economic consequences.

If Holden does decide (or already has decided) to follow its arch rival Ford and shut up shop, Toyota - the only other car brand that builds vehicles in Australia - will almost certainly be forced to do the same.

If that is the case, it has the potential to put more than 40,000 Australians out of work - both factory workers and highly-skilled engineers and designers - among not only the car maker employees but also a wider community of third-party component suppliers.

The ramifications of such actions could put just as much strain on the government as it would if it continued supporting Holden and Toyota - and to a lesser extent Ford, which will continue to operate a research and development facility in Australia after 2016.

While it seems to be lose-lose situation, the consequences will also be felt over a much wider span of the Australian landscape. The automotive industry is a major source of innovation and technology development as it covers most aspects of science, from electronics to engineering, computers to design. And, with reduced prospects of employment, it is likely to lessen the incentive for our next-generation to participate in tertiary education within these fields.

The reality is that almost every other country with an automotive manufacturing sector has some form of government-funded incentive, whether it be pricing protection, tax concessions or direct subsidies.

Unfortunately, Australia simply cannot compete without any assistance. In a market that sells just over 1 million new vehicles each year - and with more than 60 car brands selling over 300 different models - the popularity of Australian-built cars such as the Holden Commodore has dropped to record-low levels in the last decade.

Holden has done everything it could to try and arrest the slide with its latest VF model introduced earlier this year, by dropping the price and fuel consumption yet improving its level of equipment and safety. While the sales results have been encouraging, the Commodore is generally considered too big and too thirsty by modern standards.

Don't think that Holden doesn't recognise this too and has its head in the sand, but the simple fact is that car industry is a complex and expensive business and strategic decisions are made in decades not years, meaning today's Commodore is hurting from a legacy that was created in the late 1990s when it was virtually untouchable as Australia's favourite car.

Yesterday's announcement of a free trade agreement with South Korea is another knife in the back for Holden, and could potentially be the catalyst for today's kerfuffle surrounding its future. The Cruze small car it builds alongside the Commodore in South Australia originated from General Motors' Daewoo division and is also built in South Korea. The fiercely competitive small-car segment of the Australian market means, Holden has admitted, that it loses money on every vehicle it builds in Australia, and sourcing a cheaper version from South Korea is almost a no-brainer decision when the FTA is approved.

Sadly, it seems that, no matter what Holden is saying - or not saying - today, it looks as though it is almost inevitable that Australia won't have a car manufacturing industry by 2016.

Just as many Australians need the car industry to survive, the government needs it to still be there in 2016 too, because it'll be a hard ask being re-elected with 40,000-odd workers without a job going to the polls.

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